A $200 million loan commitment has an up-front fee of 20 basis points and a back-end fee of 25 basis points on the unused portion.

The up-front fee is
A)$250,000.
B)$4,000,000.
C)$400,000.
D)$775,000.

Question

A $200 million loan commitment has an up-front fee of 20 basis points and a back-end fee of 25 basis points on the unused portion.

The up-front fee is
A)$250,000.
B)$4,000,000.
C)$400,000.
D)$775,000.

Quizplus · Accepted Answer

The up-front fee is calculated as a percentage of the total loan commitment, which is $200 million.

20 basis points is equivalent to 0.20%, so the up-front fee is:

$200 million x 0.0020 = $400,000

Therefore, the correct answer is C.

A $200 Million Loan Commitment Has an Up-Front Fee of 20